With Sanket

In addition to the temporary protected status and facilitation of remittances - see my earlier post, when government offices and banks resume functioning, Haiti could usefully tap its large diaspora's wealth for the reconstruction of community infrastructure and social projects. This could be done via the issuance of "diaspora bonds". By diaspora bond, I mean not only bonding between the diaspora and the homeland, but more specifically a financial instrument for attracting investment from the diaspora.

In the past diaspora bonds have been used by Israel and India to raise over $35 billion of development financing (see my article with Suhas Ketkar). Several countries - for example, Ethiopia, Nepal, the Philippines, Rwanda, and Sri Lanka - are considering (or have issued) diaspora bonds recently to bridge financing gaps. Besides patriotism, diaspora members are usually more interested than foreign investors in investing in the home country. Not only Haitians abroad, but also foreign individuals interested in helping Haiti, even charitable institutions, are likely to be interested in these bonds. Offering a reasonable interest rate - a 5% tax-free dollar interest rate, for example - could attract a large number of Haitian investors who are getting close to zero interest rate on their deposits.

If 200,000 Haitians in the US, Canada and France were to invest $1,000 each in diaspora bonds, that would add up to $200 million. If these bonds were opened to friends of Haiti, including private charitable organizations, much larger sums can be raised. If the bond rating were enhanced to investment grade rating via guarantees from the multilateral and bilateral donors, then such bonds would even attract institutional investors.

Migration Letters invites contributions for a special issue on migration, remittances and, financial crisis (edited by Dilip Ratha, World Bank, USA and Ibrahim Sirkeci, Regent’s College London, UK). The current financial crisis is thought to be among the causes of a decline in migration and remittance flows. However, questions about the future impact of the financial crisis on the size and channels of these flows and the resilience of remittances are still to be answered. As migration and remittances have proven to be a lifeline in many developing countries, analyses of these patterns and prospects are therefore in high demand. In this special issue, we aim to bring together a select set of articles focusing on the relationship between financial crisis and global migration and remittance flows, and on the assessment of policy responses in the sending and the receiving countries.

The International Migrants Day (December 18) comes close to the end of the year – perhaps a good time to pause and look back at how remittances sent by an estimated 214 million international migrants worldwide have become even more important for development during the last year. It is impossible to do justice to the range of issues, international attention and work across the globe on this topic during the course of 2009. We highlight a few that we have been following in our blog, briefs and other work: 

• The current global economic crisis has made migration and remittances a huge issue now for many developing countries. We have been monitoring the crisis since last November when we made a fairly bold call that remittances might decline modestly but would be resilient compared to other capital flows (see story). Indeed, the data for 2009 show that remittance flows to developing countries have been remarkably resilient, while debt flows collapsed into negative territory and FDI declined by a third.* The recent debt crisis in Dubai has created additional risks, but migrants seem willing to wait it out as prospects at home are often even worse. Nonetheless, the prospect of a sharp reduction in foreign exchange flows after several years of rapid growth—and the possibility that some these workers might return—has brought remittances into the radar-screen of policy makers at the highest levels in virtually every developing country, ranging from Ethiopia to India to the Pacific Islands.
   

When I recently traveled to Addis Ababa, Ethiopia, I spoke with several government officials in the Ministry of Labour and Social Affairs who told me about the many problems encountered by their migrant workers in the Middle East.  As more Ethiopians, especially women, have been migrating to the Middle East as domestic workers, the embassies and consulates have received many complaints about false contracts being issued, passports of their nationals being taken away by their employers, and abuses in the work place.  In order to tackle these problems, the government created the Overseas Employment Service, which is modeled after the Philippines Overseas Employment Administration.

Similar to the Philippines, the office regulates the private recruitment agencies to ensure that the migrants are not signing false contracts.  All private recruitment agencies are required to obtain a 300 Birr (USD$30) license from the Ministry to recruit workers for one year (renewable), report the status of their workers, and are subject to auditing by the office to ensure that the workers are not being cheated by the agencies or their employers abroad.  The office also provides pre-departure orientation seminars to educate Ethiopians about the rules of their employment contracts, how to send remittances, and the culture and work conditions in the destination country.  This three hour orientation is conducted in the Ministry offices in Addis Ababa and the government has started 3 years ago to make it mandatory for those departing the country on overseas contracts.